IBM’s partnership with international banks to develop a Blockchain trade finance platform called Batavia has resulted in the platform’s first live pilot transactions, according to a press release published today, April 19.
IBM, the Bank of Montreal (BMO), CaixaBank, Commerzbank, Erste Group, and the United Bank of Switzerland (UBS) began work on the initiative last fall. Batavia works by tracking events in a product’s supply chain, while key events can prompt the execution of smart contracts that close trade agreements.
According to the announcement, the initial transactions involved sending cars from Germany to Spain and furniture production textiles from Austria to Spain.
Niko Giesber of Commerzbank said that the “joint successful live transaction demonstrates the potential of such a platform”:
“Trade data and smart payment, which is automatically triggered by the transport data, form an important basis for risk management and financing instruments and add value to every supply chain.”
Giesber adds that Batavia may look to partner with other fintech and financial institutions as they move forward with “building out of a product-ready solution.”
Earlier this week, India’s ICICI Bank put more than 250 corporate customers on its Blockchain platform, designed for domestic and international trade finance transactions.
The Chief Financial Officer (CFO) at Wall Street’s Och-Ziff Captial Management (Oz Management) has left to become the new CFO at major crypto wallet and exchange service Coinbase, according to Coinbase’s blog post published yesterday, April 17.
Alesia Haas has worked at Oz Management for a year and a half, previously working in executive roles at OneWest Bank and Merrill Lynch. Coinbase President and COO Asiff Hirji wrote in the company’s blog post that Haas will begin at Coinbase immediately, but will also stay on at Oz Management for the transitional period until June 1, 2018.
Brian Armstrong, the CEO and founder of Coinbase, said in the announcement post that he is “incredibly excited to have Alesia join Coinbase as our new CFO”:
“She brings deep financial services experience to our growing company. As a fintech company, finance is core to everything that we do. We plan to continue bringing the best and brightest from both finance and technology companies to help create an open financial system for the world.”
Coinbase has made two other major hiring announcements recently: a former Facebook and Twitter exec joined the crypto company as VP of communications, and Coinbase’s recent acquisition of Earn.com brought its CEO on board as the first Chief Technology Officer (CTO).
Wall Street is seemingly in the midst of an exodus of talent to the crypto sphere. Just yesterday, April 17, one former Goldman Sachs employee joined crypto wallet Blockchain.com in their bid to attract more institutional clients. Last week another now ex-Goldman Sachs exec reportedly left to join Mike Novogratz’s crypto merchant bank.
Bloomberg notes that Och Ziff is currently struggling to “overcome a corruption scandal.” The company has hired former Credit Suisse executive Thomas Sipp to replace Haas.
Credit rating giant Moody’s Investor Service said in a recent report that Blockchain technology for cross-border transactions could potentially hurt banks in Switzerland more than in any other country, CNBC reported yesterday, April 16.
As half of the Swiss banking sector revenue is from fees and commissions, Switzerland is more at risk of losing money as Blockchain tech makes cross-border transactions cheaper and faster, according to the Moody’s report:
“While making cross-border transactions faster and less expensive would be credit positive for banks, these efficiencies could also compress their fees and commissions, a credit negative.”
Moody’s Investor Service chart of the share of fees and commission income from revenue
Switzerland is also placed third, after the UK and Belgium, for Moody’s country rankings for banks that process the most cross-border transactions as related to GDP (excluding Luxembourg and Hong Kong).
Switzerland has recently been referred to as the “crypto nation” due to its supportive ecosystem for crypto, Blockchain, and Initial Coin Offerings (ICO). Earlier in April, a board member of the Swiss National Bank (SNB) said that while distributed ledger technology (DLT), like Blockchain, can reduce costs for cross-border payments, it does not meet the requirements for Real-Time-Gross-Settlement (RTGS) payment systems in regards to its data security and reliability.
The head of the Hong Kong Securities and Futures Commission (Hong Kong SFC) said during a speech on April 13 on “New Technologies and Asset Management” that the type of fundraising conducted through Initial Coin Offerings (ICO) is better suited to venture capital funds.
Julia Leung, who is also the chair of the 2016 established Fintech Advisory Group, described the current era as the “fourth industrial revolution,” citing scholar Klaus Schwab, due to its new technological innovative promise. Leung notes that although the Hong Kong SFC in its role as a securities regulator sees new technologies like Blockchain as beneficial, she underlines that embracing this new technology comes with some important caveats:
“While we acknowledge that innovative technologies such as [B]lockchain have the potential to improve efficiency and financial inclusion, that does not entitle anyone to conduct fundraising from the public in violation of securities law. Because of the highly technical content and opacity of some of these projects, it is hard for an average investor to pick winners, a job more suited for professional investors such as venture capital funds.”
Leung adds the the reality is that many of the ICOs are “dubious, if not downright frauds […] [that] escape the scrutiny of the police or securities regulators because of their crossborder nature and the way the crypto assets are structured to fall outside any regulator’s perimeter,” mentioning the recent hacking of crypto exchanges in Japan and South Korea as a “sharp reminder of the risks” of crypto trading.
In February of this year, the Hong Kong SFC warned crypto investors about the risks of investment and vowed to keep policing ICOs and crypto markets. In March, the securities regulator shut down Black Cell Technology’s ICO on the ground that it was an unregistered securities offering, making the company return the funds it had raised to investors.
Moving forward with a crypto regulatory framework, Leung notes that the G20 recently spoke about the crypto sphere at their last meeting in March. In terms of Hong Kong specifically, Leung said that the Hong Kong SFC is working with their Investor Education Center to make crypto investors more aware of risks, as well as working with organizations overseas for fintech collaboration.
The Hong Kong Exchanges and Clearing Market (HKEX) announced in March that they would be opening a dialogue with the Australian Securities Exchange (ASX) on Blockchain innovation and implementation. Leung said in the speech that the Hong Kong SFC has also signed fintech innovation agreements with regulatory bodies in the UK, Australia, Malaysia, Dubai, and Switzerland.
The Malta Financial Services Authority (MFSA) has released a consultation paper on the possible introduction of a “Financial Instrument Test” that would legally define virtual tokens, according to an April 13 announcement on their site.
The Financial Instrument Test, first proposed in a Nov. 30 paper on Initial Coin Offerings (ICO), virtual currencies, and related service providers, would determine whether a Distributed Ledger Technology (DLT) asset falls under EU and traditional financial regulations or Malta’s proposed Virtual Financial Assets Act (VFAA).
In response to positive feedback received about the Financial Instrument Test, the MFSA said in their April 13 circular that they are “considering the introduction of the Test as a mandatory requirement under the VFAA, applicable both within the context of an Initial Coin Offering (‘ICO’) as well as during the intermediation of DLT assets.”
The consultation paper on the Financial Instrument Test notes that the MFSA is “seeking feedback from the industry” before moving forward with a final variation of the test, and the public can voice their opinions through a survey active through May 4.
Malta is currently attempting to build a reputation as the “Blockchain island,” through creating a crypto-friendly regulatory environment. Malta had released a document in February – “Malta – A leader in DLT Regulation” – and proposed the Malta Digital Innovation Authority Bill and the VFAA to bring crypto-related business to the island.
The world’s largest crypto exchange by trade volume (at press time) Binance recently announced they would open an office in Malta, a move welcomed personally by the prime minister of Malta, Joseph Muscat. The world’s third largest crypto exchange, OKEx, also announced plans last week to expand to Malta.
While Wall Street giants JP Morgan and Citigroup experienced strong first-quarter earnings, their share prices overall fell, the Wall Street Journal (WSJ) reported Friday, April 13.
The WSJ reports that while equity trading revenue rose by 26 percent to $2 bln at JP Morgan, which also saw a 35 percent net profit rise, and Citigroup’s equity trading revenue up 38 percent to $1.1 bln, with a 13 percent rise of net profit, share prices of both banks fell on Friday.
JP Morgan’s share price is now around $110, down 2.7 percent by market’s close yesterday, according to data from Bloomberg Markets.
Citigroup’s share price is now around $71, down a little more than 1.5 percent.
Wells Fargo also experienced a first quarter increase in profits of 5 percent to $5.9 billion, adding the caveat that the numbers could be recalculated after a potential $1 bln regulatory settlement, WSJ notes. Wells Fargo share price was around $50 by market’s close yesterday, down more than 3 percent.
In another article, the WSJ mentions that a possible reason for the share prices of these Wall Street banks falling could be due to the past week’s mini-rally that led to investors taking profits. The recent tax reform could bring benefits to the banks that could help their share price, but not while it is still in its early stages, JP Morgan CFO Marianne Lake told the WSJ.
The traditional markets had started off the second quarter relatively low, as the crypto markets ended their worst first quarter ever for Bitcoin (BTC) and Ethereum (ETH). At second quarter’s start on April 2, the founder of investment management firm DoubleLine Capital had said that BTC had become the “new” stock market indicator as the “lead horse” of risk assets.
The crypto markets have since seen relatively strong second quarter growth, with Bitcoin’s price jumping by more than $1,000 in the span of 30 minutes on April 12. The crypto markets continued to see growth across the board on Friday as well, with BTC solidly over $8,000 and ETH surpassing $500.
As of press time, BTC is trading for around $7,998, down almost 2 percent over a 24 period. ETH is down almost 5 percent over a 24 period, trading for around $496 by press time.